Posted
by
samzenpuson Monday January 14, 2013 @05:17PM
from the dude-you're-buying-dell dept.

puddingebola writes "Dell Inc. is reported to be in buyout talks with private equity firms. From the story, 'Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.'"

We've seen this script before. The private equity firm forces the company to take out huge loans, which are then paid to the equity firm as consulting and management fees, and bonuses. Dell's largest operating cost becomes servicing the debt, which means everything else gets cut -- product research, product quality, staff, salaries. The market quickly realizes that Dell products have become shit(tier), and customers flee.

Four years later, the equity firm is several hundred million dollars richer, Dell goes bankrupt and is liquidated, and thousands of former Dell employees are out of work.

If you were a bank considering a loan to Dell (and not already in collusion with the private equity firm), you should be very very skeptical you will ever see your money again.

As far as I know, "private equity" firms are companies that restructure companies while borrowing cash to finance said company... but leaving the company holding the bag on that dept. Should the company fall (now with even more debt and someone else steering the ship) the equity firm gets a big pay off while yet another company goes under.

Dell's assets include much more than desktops/latops/servers. For instance, a couple years ago they bought SecureWorks, an MSSP that Gartner positions above Verizon, IBM, and Symantec. They have made many other acquisitions in recent years. From the article, Dell has net $5 billion in cash. I don't think Dell as a company is going anywhere, public or private. Maybe they'll pull an IBM and only sell of the PC side of the house.